Great Britain

The strong growth in operating profit after tax for Great Britain to $361 million reflects strong profit performance in local currency terms (10.2% increase over March 2000 half year) and by the impact of currency movements to generate a 19.1% profit improvement.

Clydesdale and Yorkshire Banks ⁽¹⁾

Profit & Loss Australian Dollars	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 $m	Sept 00 $m	Mar 00 $m	Sept 00 %	Mar 00 %
Net interest income	858	783	742	9.6	15.6
Other operating income	472	445	431	6.1	9.5
Total operating income	1,330	1,228	1,173	8.3	13.4
Other operating expenses	599	571	556	(4.9)	(7.7)
Underlying profit	731	657	617	11.3	18.5
Provision for doubtful debts	142	127	128	(11.8)	(10.9)
Profit before tax	589	530	489	11.1	20.4
Income tax expense	186	158	154	(17.7)	(20.8)
Profit after tax before goodwill and abnormals	403	372	335	8.3	20.3

Profit & Loss Pounds Sterling	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 £m	Sept 00 £m	Mar 00 £m	Sept 00 %	Mar 00 %
Net interest income	314	303	292	3.6	7.5
Other operating income	173	172	169	0.6	2.4
Total operating income	487	475	461	2.5	5.6
Other operating expenses	224	220	220	(1.8)	(1.8)
Underlying profit	263	255	241	3.1	9.1
Provision for doubtful debts	52	49	50	(6.1)	(4.0)
Profit before tax	211	206	191	2.4	10.5
Income tax expense	66	61	60	(8.2)	(10.0)
Profit after tax before goodwill and abnormals	145	145	131	-	10.7

(1) Excluding results of Vivid and the storecard operations of Yorkshire Bank Retail Services, which have been discontinued.

Key Performance Measures

Net interest margin	4.25%	4.29%	4.41%
Other operating income / total income	35.5%	36.2%	36.7%
Cost income ratio	46.0%	46.3%	47.7%
Gross non-accrual loans to gross loans and acceptances	1.28%	1.37%	1.64%

Highlights

Operating profit after tax for Clydesdale and Yorkshire Banks increased 20.3% to $403 million which reflects a strong profit performance in local currency terms of 10.7% over the March 2000 half year.

Clydesdale and Yorkshire Banks net interest income increased by $116 million or 15.6% (7.5% in local currency), driven by strong growth in core lending of $7.3 billion or 22.5% (10.8% in local currency) primarily in fixed and variable mortgages, variable rate instalment lending through the success of the Tailored Business Loan product, and lease finance. Deposit growth of 8.8% (in local currency) was achieved in retail deposits and higher on-demand deposits.

Margin for Clydesdale and Yorkshire Banks declined by 16 basis points, from 4.41% at March 2000 to 4.25% at March 2001. This reduction was mainly driven by a strategy of changing the business mix through targeting strong growth in building a quality mortgage lending portfolio and from competitive margin pressure in this market.

Other operating income of Clydesdale and Yorkshire Banks grew by $41 million or 9.5% (2.4% in local currency terms), compared to the previous corresponding period primarily due to increased brokerage and commission fee income, creditor insurance income and strong sales of interest rate risk management products. These increases in other operating income were partly offset by lower account fee income as customers change their transactional behaviours.

Other operating expenses increased by $43 million or 7.7% but only 1.8% in local currency. Increased personnel costs due to merit increases in the trading banks were partly offset by a reduction in the number of full time equivalent employees. Tight cost controls were maintained in Clydesdale and Yorkshire Banks with the cost to income ratio declining from 47.7% to 46.0%.

Bad and doubtful debts increased 4.0% in local currency terms due to an increased statistical based provision charge as a result of increased lending volumes.